Regulations Round-Up – October 2021

Cryptocurrency prices stalled in September as investors focused on the regulatory crackdown in China. After soaring to a multi-month high of $52,000, Bitcoin erased some of the gains and ended the month slightly below $44,000. The total market capitalization of all cryptocurrencies tracked by CoinMarketCap crashed from more than $2.3 trillion to more than $1.8 trillion. As an agency specialising in financial marketing, our team has rounded up the top regulation changes in September, and now we’re looking at what’s coming up in October 2021.

China crackdown

The biggest regulatory story in September was from the People’s Bank of China (PBOC). The bank announced that all cryptocurrency transactions in the country were illegal. It went an extra mile and warned that it was illegal for offshore companies to offer cryptocurrency services to Chinese citizens.

As a result, many like Huobi and Binance announced that they will ban new Chinese users and retire accounts of the existing customers. Still, the announcement led to more demand for decentralized exchanges like PancakeSwap and Uniswap that allow users from around the world.

China’s regulators, known for their hard stance on freedom of movement, have always been afraid of cryptocurrencies because their transactions are difficult to track. Also, they fear that these currencies can be used for tax evasion and other illegal activities.

The crackdown on cryptocurrencies came at a time when China has also intensified its focus on other sectors like education and technology.

CySEC head to open IFX Expo

The IFX Expo is one of the biggest business-to-business and business-to-consumer finance events globally. The event brings entrepreneurs, business leaders, policymakers, and other participants together to deliberate key issues. In October, IFX Expo will take place in Limassol.

There is a possibility that there will be key regulatory announcements during the expo. This is because the new head of the Cyprus Securities and Exchange Commission (CySEC) will be a headline speaker. Mr. George Theocharides was recently appointed the CySEC head after serving as the vice-chairman from July last year. He will likely talk about his views on the current state of regulations and reiterate some of his priorities going forward.

Meanwhile, in September, CySEC published a policy statement covering the registration process and operations of crypto-asset service providers in the country. The agency noted that these assets will be classified into either investment services and activities or as electronic money. Also, companies in the industry will need to align with AML and KYC policies.

SEC on crypto regulations

In September, Gary Gensler, the Securities and Exchange Commission (SEC), testified before a congressional committee in September. In it, he reiterated the need to have solid regulations in the industry in a bid to protect customers and boost transparency. In a separate interview, he argued that unregulated digital currencies markets would not end well. He said:

“There are trading venues and lending venues where they coalesce around these, and they have not just dozens but hundreds and sometimes thousands of tokens on them. This is not going to end well if it stays outside the regulatory space.”

In his prepared remarks for the Future of Asset Management North America Conference, Gensler reiterated his support for Bitcoin futures. He cited a law created in 1940 that provides significant protections for mutual funds and exchange-traded funds (ETFs).

ESMA and the risks of cryptocurrencies

In September, the European Securities and Markets Authority (ESMA) warned that cryptocurrencies were both innovative and risky instruments. The report, titled Trends, Risks and Vulnerabilities, identified that some of the key risks for cryptocurrencies were their volatility and the popularity of stablecoins.

Stablecoins are blockchain projects like USDC and USDT that are backed by fiat currencies. Regulators in Europe and the US are attempting to create regulations for the sector. The ESMA report said:

“Most crypto assets (CAs) are highly volatile in price and operate outside of the existing EU regulatory framework, which raises investor protection issues.”

If you enjoyed our Regulations Roundup September 2021, be sure to hit the share button. Love this type of content and want it for your FX broker or crypto exchange? We hear you. Contact the Contentworks team for financial services content.

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